London Stock Exchange committed to Refinitiv deal in pandemic-hit markets

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LONDON (Reuters) – The London Stock Exchange said on Tuesday it was committed to completing its $27 billion takeover of data company Refinitiv in the second half of the year, with no plans to revise its savings targets for the deal as a deep recession beckons.

“We still have a lot of confidence in the transaction, in the strategic rationale of the transaction,” LSE Chief Executive David Schwimmer told analysts.

The coronavirus pandemic is sending economies rapidly into deep recession, forcing many companies to furlough millions of staff and raise funds to stay afloat.

Analysts asked Schwimmer whether the deteriorating economy was changing his view of the Refinitiv deal and he said it was “a little bit early to be speculating” on synergies from the deal.

The recurring nature of Refinitiv’s income was an “attractive element” that offers resilience during such economic conditions, Schwimmer said.

“I don’t think that at this point we have any plans to change anything in terms of our target synergies,” Schwimmer said.

“We think the combined business would be able to continue to perform well through an environment like this and would be able to handle the leverage.”

Refinitiv is 45%-owned by Thomson Reuters, which owns Reuters News.

COMPETITION SCRUTINY

European Union competition regulators had requested a delay on all filings from merger parties due to its staff having to work from home during the coronavirus pandemic.

“We continue to engage constructively with the case team at the European Commission. They have been in communication with us and we continue to answer questions. We are continuing to make progress,” Schwimmer said.

Schwimmer said he was still committed to completing the deal in the second half of this year.

LSE Chief Financial Officer David Warren said the “bridge” put together with banks to finance the deal could be extended until 2021 if need be and contained “significant headroom”.

There is a “drop dead” May 2021 deadline for the transaction that can be extended by mutual agreement of both parties.

The LSE said it was too early to say what the impact of the pandemic would be on its own operations but that it has over 1 billion pounds in free cash and cash lines to maintain continuity of business.

“Our business continues to generate cash and bring our own leverage down,” Schwimmer said.

The LSE intends to pay its final dividend for the 2019 financial year, subject to approval from shareholders at the annual meeting later on Tuesday morning, it said.

The exchange posted first quarter results on Tuesday that were lifted by higher trading and clearing volumes during recent bouts of extreme market volatility.

First quarter total income rose 13% year-on-year to 615 million pounds ($763.2 million) as the exchange benefited from higher trading in shares, and higher clearing activity.

Markets across the world faced bouts of extreme volatility and record volumes during March as investors priced in recessions following national lockdowns that have shut down swathes of economic activity.

“There will be lots of consideration about how the ecosystem worked in the period of heightened volatility. I am not clear that we are through the worst of this yet,” Schwimmer said.

“We can say with confidence that so far our systems have worked very well,” Schwimmer said.